Monetary Policy and Bank Lending in Developing Countries: Loan Applications, Rates, and Real Effects

67 Pages Posted: 13 Jun 2017 Last revised: 9 Mar 2019

See all articles by Charles Augustine Abuka

Charles Augustine Abuka

Bank of Uganda

Ronnie Kyamureku Alinda

Bank of Uganda

Camelia Minoiu

Federal Reserve Board

Jose-Luis Peydro

Government of Catalan - Catalan Institution for Research and Advanced Studies (ICREA); Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Barcelona Graduate School of Economics (Barcelona GSE); Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Centre for Economic Policy Research (CEPR)

Andrea Filippo Presbitero

Università Politecnica delle Marche - Department of Economics; Centre for Macroeconomics & Finance Research (CeMaFiR)

Multiple version iconThere are 2 versions of this paper

Date Written: March 6, 2019

Abstract

Recent studies of monetary policy in developing countries document a weak bank lending channel based on aggregate data. In this paper, we bring new evidence using Uganda's supervisory credit register, with microdata on loan applications, volumes and rates, coupled with unanticipated variation in monetary policy. We show that a monetary contraction reduces bank credit supply---increasing loan application rejections and tightening loan volume and rates---especially for banks with more leverage and sovereign debt exposure. There are associated spillovers on inflation and economic activity---including construction permits and trade---and even social unrest.

Keywords: Monetary policy, Bank lending channel, Real effects, Developing countries

JEL Classification: E42, E44, E52, E58, G21, G28

Suggested Citation

Abuka, Charles Augustine and Alinda, Ronnie Kyamureku and Minoiu, Camelia and Peydro, Jose-Luis and Presbitero, Andrea Filippo, Monetary Policy and Bank Lending in Developing Countries: Loan Applications, Rates, and Real Effects (March 6, 2019). Available at SSRN: https://ssrn.com/abstract=2985006 or http://dx.doi.org/10.2139/ssrn.2985006

Charles Augustine Abuka

Bank of Uganda ( email )

P.O. Box 7120
37/43 Kampala Road
Kampala
Uganda

Ronnie Kyamureku Alinda

Bank of Uganda ( email )

P.O. Box 7120
37/43 Kampala Road
Kampala
Uganda

Camelia Minoiu (Contact Author)

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Jose-Luis Peydro

Government of Catalan - Catalan Institution for Research and Advanced Studies (ICREA) ( email )

P/ Lluis Companys 23
Barcelona, 08010
Spain

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, Barcelona 08005
Spain
(+34) 93 542 1756 (Phone)
(+34) 93 542 1746 (Fax)

HOME PAGE: http://https://sites.google.com/site/joseluispeydroswebpage/

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

HOME PAGE: http://www.barcelonagse.eu/Faculty.php?id=432

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Andrea Filippo Presbitero

Università Politecnica delle Marche - Department of Economics ( email )

Piazzale Martelli, 8
Ancona, AN 60121
Italy
+39 0712207074 (Phone)

HOME PAGE: http://sites.google.com/site/presbitero/

Centre for Macroeconomics & Finance Research (CeMaFiR) ( email )

Piazza Mirabello, 2
Milan, 20100
Italy

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